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TMI Blog2025 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... restaurants and other establishments is permissible under the Consumer Protection Act, 2019 (hereinafter, the 'CPA, 2019')? Background: 3. The Central Consumer Protection Authority ('CCPA') established under Section 10 of the CPA, 2019 received several complaints regarding restaurants and hotels (hereinafter, the 'restaurant establishments') charging 'Service Charge' over and above the cost of the food items. This Charge in the range of 5-20% in lieu of 'Tip' or 'Gratuity', was being collected from consumers on a compulsory basis. In addition, Goods and Services Tax ('GST') was charged on the said service charge, resulting in substantial burden consumers. The CCPA then issued guidelines to prevent unfair trade practices and protect consumer interest with regard to levying of service charge, on 4th July, 2022. The same are extracted hereinbelow for ready reference: "3. It has come to the notice of the CCPA through many grievances registered on the National Consumer Helpline that restaurants and hotels are levying service charge in the bill by default, without informing consumers that paying such charge is voluntary and optional. Further, service charge is being levied in additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of service charge shall be imposed on consumers. (v) Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount. 8. The aforementioned guidelines shall be in addition to and not in derogation of the guidelines dated 21.04.2017 published by the Department of Consumer Affairs. 9. If any consumer finds that a hotel or restaurant is levying service charge in violation to the above mentioned guidelines, a consumer may:- (i) Make a request to the concerned hotel or restaurant to remove service charge from the bill amount. (ii) Lodge a complaint on the National Consumer Helpline (NCH), which works as an alternate dispute redressal mechanism at the pre-litigation level by calling 1915 or through the NCH mobile app. (iii) File a complaint against unfair trade practice with the Consumer Commission. The Complaint can also be filed electronically through e-daakhil portal www.edaakhil.nic.in for its speedy and effective redressal. (iv) Submit a complaint to the District Collector of the concerned district for investigation and subsequent proceeding by the CCPA. The complaint may also be sent to the CCPA by e-mail at com-ccpa@n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of this Ministry through a number of complaints from consumers received in the National Consumer Helpline that hotels and restaurants are following the practice of charging 'service charge' in the range of 5-20%, in lieu of tips. A consumer is forced to pay this charge irrespective of the kind of service provided to him. The consumers are also required to pay service tax on this service charge so collected by the hotels and restaurants. 2. The Consumer Protection Ac, 1986 provides that a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice. The said Act further provides that a consumer can make a complaint to the appropriate consumer forum established under the Act against (i) an unfair trade practice adopted by any trader or service provider (ii) the services hired or availed of, suffered from deficiency in any respect (iii) a trader or service provider, as the case may be, has charged for the goods or for the services a price in excess of the price. (a) fixed by or under any law for the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "The Department of Consumer Affairs has asked the State Governments to sensitize the companies, hotels and restaurants in the states regarding aforementioned provisions of the Consumer Protection Act, 1986 and also to advise the Hotels/Restaurants to disseminate information through display at the appropriate place in the hotels/restaurants that the 'service charges' are discretionary/ voluntary and a consumer dissatisfied with the services can have it waived off." 13. A reply to the letter dated 14th December, 2016 and the advisory published on 2nd January, 2017 by the Department of Consumer Affairs was sent by the NRAI to the Department of Consumer Affairs on 4th January, 2017. However, on 21st April, 2017 an advisory was again issued by the Department of Consumer Affairs, inter alia, stating that service charge is to be paid at the discretion of the customer. The relevant portion of the same is extracted hereinunder: "GUIDELINES ON FAIR TRADE PRACTICES RELATED TO CHARGING OF SERVICE CHARGE FROM CONSUMERS BY HOTELS/RESTAURANTS Whereas, the Department of Consumer Affairs. Government of India is mandated to ensure that consumers are protected as per the provisions of the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a position to assess quality of service, and decide whether or not to pay a tip/gratuity and if so, how much. Therefore, if a hotel/restaurant considers that entry of a customer to a hotel/restaurant amounts to his/her implied consent to pay a fixed amount of service charge, it is not correct. Further, any restriction of entry based on this amounts to a trade practice which imposes an unjustified cost on the customer by way of forcing him/her to pay service charge as condition precedent to placing order of food and beverages. and as such it falls under restrictive trade practice as defined under section 2 (1) (nnn) of the Act (5) In view of the above, the bill presented to the customer may clearly display that service charge is voluntary, and the service charge column of the bill may be left blank for the customer to fill up before making payment. (6) A customer is entitled to exercise his/her rights as a consumer, to be heard and redressed under provisions of the Act in case of unfair/restrictive trade practices and can approach a Consumer Disputes Redressal Commission/Forum of appropriate jurisdiction." 14. On 20th May, 2022 the Department of Consumer Affairs sent a letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Consumer Affairs (DoCA) has scheduled a meeting on 2nd June, 2022 with the National Restaurant Association of India to discuss the issues pertaining to Service Charge levied by restaurants. The meeting follows as a result of DoCA taking notice of a number of media reports as well as grievances registered by consumers on the National Consumer Helpline (NCH). In a letter written by Shri Rohit Kumar Singh, Secretary, Department of Consumer Affairs to President, National Restaurant Association of India, it has been pointed out that the restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is Voluntary and at the discretion of consumers and not mandatory as per law. It has been pointed out in the letter that the consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. Consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount. "Since this issue impacts consumers at large on a daily basis and has significant ramification on the rights of consumers, the department con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia clarifying the nature of implementation of the service charge. The relevant portion of the Guidelines are extracted above in paragraph 3. 19. Further, on 6th July, 2022 the Ministry of Consumer Affairs, Food and Public Distribution issued a communication to the District Collectors of all States and Union Territories inter alia intimating them that levying of service charge in violation of the guidelines dated 4th July, 2022 would be an unfair trade practice under the contours of the CPA, 2019. The communication dated 6th July, 2022 is extracted hereinunder for ready reference: "As you might be aware, the Central Consumer Protection Authority (CCPA), has recently issued guidelines under Section 18(2)(1) of the Consumer Protection Act, 2019 (" hereinafter called the Act") to prevent unfair trade practices and protection of consumer interest with regard to levy of service charge in hotels and restaurants. The guidelines came into effect from 04.07.2022, i.e., on the day they were issued. The guidelines are attached as Annexure - I. 2. The guidelines stipulates the following: * Hotels or restaurants shall not add service charge automatically or by default in the food bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by another advisory by the Department of Consumer Affairs dated 21st April, 2017 wherein again the Department sought to direct that the bills raised by establishments ought to display clearly in the menu card that payment of service charge is voluntary. 23. According to the Petitioners, after the advisory dated 21st April, 2017, the Petitioners and their members continued to collect service charge from consumers. It is their case that service charge is recognized as valid, in various decisions. Further, the CCPA has no power or jurisdiction under the CPA, 2019 to issue such guidelines which impinge upon the Petitioners' rights to carry on their businesses as provided under Articles 14 and 19 of the Constitution of India. 24. It is further, the case of the Petitioners, that the levy of service charge is purely the discretion of the management of the establishment. The said charges are used for the benefit of staff, labour, utility workers, backend workers, etc. As per the law laid down in the Constitution of India, the Government has no authority to interfere in the decision of the owner of the establishment to levy service charge, which is prevalent in most countries in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder in respect of the Application for vacating Stay/ Final Hearing in accordance with law without being influenced by the interim order passed by him." 27. On 15th February, 2023, certain practices adopted by the restaurant establishments were brought to the notice of the Court wherein the stand of the Respondents was that the interim order dated 20th July, 2022 was being used by the restaurant establishments, as the basis for charging service charge, by displaying it both, in the menu card as also the display boards outside their establishments. To substantiate this stand, the Respondents have placed on record a sample image of a restaurant establishment following this practice. The same is extracted hereinbelow for ready reference: 28. Certain examples of restaurant establishments such as the Punjab Grill, The Beer Cafe, The Urban Foundry & Distillery, etc. were cited before the Court to show how the restaurant establishments were using the interim order dated 20th July, 2022, as the basis for charging service charge. Grievances raised by consumers, pertaining to the same were registered in the National Consumer Helpline from 21st July,2022 to 29th October, 2022. The same are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erim order passed by the Hon'ble High Court, Delhi allowing restaurants to collect service charges by way of prior intimation to the consumers. 5. Vapour Pub & Brewery Respond as "Our policy was clear. If a guest asks for service charge removal we should remove it without question. Now attached an article of high court stay and say the matter is sub-judice and appropriate course of action will be followed as per directions of the Honourable court" 29. Considering these submissions, on 12th April, 2023, a detailed order was passed to the following effect: "9. Considering the submissions made and the concerns raised on both sides, the following directions are issued: i. At the outset, it is noticed that both these petitions have been preferred by associations/federations of hotels and restaurants. In order to have clarity as to the members qua whom the present writ petitions have been preferred, taking into consideration, orders passed in WP(C) 3324/1999 titled 'Kuber Times Emp. Assn. v. State & Ors.', both the associations/federations shall file a complete list of all their members who are supporting the present writ petitions. The said list shall be filed by 30th April 2023. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on record. As per the said affidavit, 80% of the NRAI members impose service charge on the customers as a mandatory condition. In the said affidavit, it has been stated that the members of NRAI are not willing to change the terminology from 'Service Charge' to any of the alternatives proposed by the Court as put to them in the order dated 12th April, 2023. The minutes of the meeting of the Managing Committee dated 18th April, 2023 of NRAI reveals that the conclusion that the said association has reached that the terminology of service charge cannot be changed. It is further claimed in the said affidavit by the NRAI that there is also no scope of confusion between the terms 'Service Tax' and 'Service Charge' as the Service Tax is no longer being imposed by restaurants and hotels. (ii) Insofar as FHRAI is concerned, the list of members that has been placed on record is totalling to 3327 members. As per the affidavit filed by Mr. Jaison Chacko - Secretary General of FHRAI, amongst the members of FHRAI, there is no uniformity or consistency being followed in respect of 'Service Charge' - some members charge 'Service Charge' and some do not. However, it is specifically stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciations, in the meantime, while the Court considers this petition, the following interim directions are issued: (i) That the members of FHRAI, who are collecting the charges, shall with immediate effect cease the usage of the term 'Service Charge' and only use the terminology 'Staff Contribution' for the amount being charged as 'Service Charge' currently; (ii) The said amount being charged as 'Staff Contribution' by members of FHRAI shall not be more than 10% of the total bill amount excluding the GST component; (iii) In case of establishments mentioned in (i) above, the menu cards shall specify in bold that after the payment of 'Staff Contribution', no further tip is necessary to be paid to the establishment/servers/restaurant staff; 11. The above is merely an interim order and directions, which shall be subject to further orders in the writ petitions. The above order shall not be construed as an approval of the charges being collected, in as much as the legality of the collection of such charges is to be adjudicated by this Court." 35. The matter was then taken up on 11th March, 2024. During the course of arguments on 11th March, 2024, it was brought to the notice of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffidavit was thereafter filed on 10th April, 2024. The same was taken on record on 23rd April, 2024. On the said date, Mr. Jaison Chacko, Secretary General of the FHRAI was present in Court. He confirmed that the signatory of the letter dated 24th June, 2024 i.e., Mr. Gurbaxish Singh Kohli was the Vice-President of the FHRAI for a period of four years. It was confirmed that he had signed the said letter. However, the stand of the FHRAI was that the statements made in the said letter ought not to be taken in isolation. 37. Thereafter, the matters were heard from time to time. Submissions made by counsel for the parties are recorded as under: - Submissions on behalf of the Petitioners: 38. Ld. Counsels - Mr. Lalit Bhasin and Mr. Sameer Parekh, appearing on behalf of the Petitioners submit as under: 38.1. The impugned guidelines dated 4th July, 2022 issued by the CCPA impinge upon the rights of the Petitioners guaranteed under Article 19 (1) (g) of the Constitution of India inasmuch as it interferes with the right to trade which is conferred upon the owners of such establishments. 38.2. The establishment ought to have the freedom to price its goods in the manner it chooses, eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 years. It has been repeatedly recognized by the Supreme Court and High Courts in various judicial decisions. The rationale behind imposing service charge or levying a service charge is in order to ensure equitable distribution of the tip amount which is paid by the consumer. So long as the menu of the restaurant establishment informs the customer prior to placing an order about the service charge, the service charge ought to be paid by the consumer. 38.11. Charges in the nature of service charge, have always been a matter of bargain and contract between management and the workmen. The charge is levied for the benefit of various workers and in fact, form part of the settlements which managements enter into with their workmen. Hence, the present matter is a contractual issue wherein the CCPA has no mandate. 38.12. The labour law jurisdiction is vested with the Labour Court, etc. which have repeatedly recognized service charge as being a component of charges collected by the management for the benefit of the workmen. The same is not governed by the CPA, 2019 but is part of the labour law jurisprudence. Further, settlements under the industrial disputes law are sacrosanct and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, implicitly agrees to it. Thus, an implicit contract exists between the establishment and the consumer, which cannot be overridden. Moreover, this implicit contract cannot give rise to a complaint, in terms of Section 2 (6)(iv) of the CPA, 2019. 38.18. There are a large number of restaurant establishments which are run in the country and in comparison, thereto, the complaints which are stated to have been received by the Respondent are few in number. 38.19. The NCDRC as also the MRTP Commission have dealt with this very issue in various judgments, wherein it has clearly been observed that service charge is a recognized mode of collecting amounts for the benefit of the workmen. Ld. Counsels submit that specialized Tribunals having already taken a view and permitting service charges to be collected, the CCPA's jurisdiction would be completely untenable. Reliance is placed upon the following judgments to argue this proposition: * Nitin Mittal vs. Pind Balluchi Restaurant (MANU/CF/0402/2012), * S. S. Ahuja vs. Pizza Express (MANU/MR/0105/2001). * The Rambagh Palace Hotel, Jaipur v. The Rajasthan Hotel Workers' Union, Jaipur [(1976) 4 SCC 817] * Management of Wenger and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry practice. The following authorities are referred to: "The Art and Science of Modern Innkeeping by Jerome J. Vallen [pages 240-242] Hotel Accounts and Their Audit by Lawrence S. Fentou, FCA and Norman A. Fowler, FCA published by the The Institute of Chartered Accountants in England and Wales: "Service charges and Tips Service charges are often levied by a percentage addition to a guest's bill to represent gratuities to restaurant and room service staff. Sometimes such moneys are paid over to the staff by the hotel via the normal wages system or through the Tronc Master. In other cases staff are paid fixed rates irrespective of the service charges collected, or the or the tariff prices may be inclusive of service charges and VAT. Treatment of service charge income varies with each concern. The auditor should investigate the accounting treatment, and see that the policy is consistent from period to period." 38.26. Mr. Bhasin, ld. Counsel, refers to a book titled 'Industrial Relations Wage Fixation Hotels & Restaurants' which, according to him, provides illustrations and examples of numerous labour awards that have recognized the collection of service charges for over 50 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the ground of the Respondent that GST is being levied on service charge, the same falls within the power of the GST department and GST authorities and the CCPA cannot interfere in this area. Submissions on behalf of the Respondents: 39. On behalf of the Respondents Mr. Chetan Sharma - ld. ASG; ld. Counsels Mr. Sandeep Mahapatra and Mr, Kirtiman Singh addressed their submissions which are set out below: 39.1. NRAI and FHRAI have merely 1116 and 3000 members respectively whereas tall claims are made in the petition that there are lakhs and lakhs of members. This is a completely incorrect statement. 39.2. There is no restriction or mandate imposed by the authority which restricts the flexibility of establishments to price food products in the manner as they choose. Adequate freedom exists for the establishments to price the food products and other items. 39.3. The freedom guaranteed to the Petitioners under Article 19 of the Constitution of India is not impinged upon. The fundamental argument is that after fixation of the prices of food items, over and above the price of the food products, the consumer cannot be mandatorily asked to pay a service charge. 39.4. Power to 'L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authority could not have just been a mute spectator. 39.11. There is a long background which led to the issuance of these guidelines. Firstly, a letter was sent by the Ministry of Consumer Affairs on 14th October, 2015 to the Hotel Association of India in respect of collection of service charges. In response to the said letter, on 28th October, 2015, the said association took a position that levying of service charge is a globally accepted practice. However, the Hotel Association of India also clearly informed the Ministry that if a consumer is dissatisfied with the experience the service charge can even be waived of. The same is extracted for reference: "It is also pertinent to note that service charge is completely discretionary. Should a customer be dissatisfied with the dining experience he can/she can have it waived off. Therefore, it is deemed to be accepted voluntarily less than one percent of customers ask for a waiver, further substantiating their acceptance of this practice." 39.12. The Ministry of Consumer Affairs upon receiving this clarification from the Hotel Association of India wrote to the Food and Civil Supplies Ministry of all State and Union Territories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to terminology used for service charge was also not uniform and was creating confusion. In the bills the terms being used were VSC, SC, SER, etc. 39.16. In response to the large volume of complaints which were received by the Ministry of Consumer Affairs, a press release was issued by the Ministry on 2nd June, 2022 raising consumers' grievances with respect to service charge and sought stakeholder consultation. In response to this press release, one of the associations namely Mumbai Grahak Panchayat also wrote to the Ministry stating that the Government ought to declare collection of involuntary service charge as an unfair trade practice. 39.17. After the press release dated 2nd June, 2022 consultations were held with NRAI and FHRAI. It is after such consultation with consumer organizations and the establishments that the impugned guidelines dated 4th July, 2022 were issued. In order to ensure proper intimation and enforcement of the guidelines, communications were also issued to all the District Collector on 6th July, 2022 to conduct investigation and take action in terms of the Act and submit a report to the CCPA. Thus, the impugned guidelines were not in violation of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded on the basis that the tourism ministry had approved the service charge on the menu charge. However, the Ministry in the present case, has confirmed the opposite. 39.25. In Nitin Mittal v. Pind Balluchi Restaurant (supra) the issue of pricing arose in the context of differentiation between the dining charges and take-away charges and only in that context, the MRTP had held that service charge can be levied. 39.26. Insofar as the word 'levy' is concerned, it is argued that levy means an approval from the Government for a sovereign function. Reliance is placed upon the decision of Krishnakant Sakharam Ghag v. Union of India and Ors., W.P.(C) 4839/2003 dated 3rd March, 2006 passed by the ld. Division Bench of the Bombay High Court. 39.27. The Respondents do not object to the price of goods being as per the discretion of the restaurant establishments but anything above the price of goods as service charge would not be permissible. 39.28. It is also highlighted that in at least three countries i.e., Mexico, Switzerland and U.S., tip or gratuity is a voluntary service fee. 39.29. The consumer protection helpline receives a large quantum of complaints in respect of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2002 which made some changes in the pecuniary jurisdiction of consumer redressal forums and contemplated the creation of Benches for State and National consumer Commissions. In the amendment in 2002, one of the important additions was the inclusion of services and service providers into the ambit of the law. Over the next few years, consumer cases in respect of products as well as services saw a substantial increase. 45. The growth of the internet also changed the manner and mode of sale and purchase. E-commerce platforms came to be established and other methods of selling such as direct selling, telemarketing, multilevel marketing also became quite prevalent. In order to deal with the challenges that consumers were facing in the new marketplace which included brick and mortar shops, shopping arenas, wholesale malls, retail malls, e-commerce platforms, multilevel marketing and telemarketing platforms, etc., a need was felt for enacting a new law for protection of consumer rights. The Consumer Protection Act, 2019 46. The CPA, 2019 was then enacted to address challenges of the new markets. The Statement of Objects and Reasons of the 2019 Act recognizes the need for creation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work incidental thereto. v. Section 28 of the CPA, 2019 defines misleading advertisement inter alia as an advertisement which deliberately conceals important information. vi. Section 2 (38) of the CPA, 2019 defines product service provider as a person who provides any service in respect of a particular product. vii. Under Section 2 (42) of the CPA, 2019 the term 'service' is defined as a service of any description made available to potential users. Any service which is free of charge would not constitute service under this provision. viii. Section 2 (46) of the CPA, 2019 defines unfair contract as one which has terms causing significant change in the rights of consumers including imposing any unreasonable charge, obligation or condition which puts a consumer to disadvantage. ix. Section 2 (47) of the CPA, 2019 defines 'unfair trade practice' as a trade practice which, insofar as it is relevant in the present case, would mean a trade practice which is given below: (i) making any statement, whether orally or in writing or by visible representation including by means of electronic record, which- (a) falsely represents that the goods are of a particular standard, quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display or sale; or (C) contained in or on anything that is sold, sent, delivered, transmitted or in any other manner whatsoever made available to a member of the public, shall be deemed to be a statement made to the public by, and only by, the person who had caused the statement to be so expressed, made or contained. Central Consumer Protection Authority 48. One of the most important features of the CPA, 2019 is the establishment of the CCPA, which is a regulator for protection and enforcement of the rights of consumers. The CCPA is established under Section 10 of the CPA, 2019 as a regulator to regulate matters relating to violation of the rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interest of the public and consumers. The CCPA is also established to promote, protect and enforce the rights of consumers as a class. 49. The CCPA consists of a Chief Commissioner who manages the body along with other Commissioners. It consists of an investigation wing as provided u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on consumer rights to ensure effective enforcement of consumer rights; (f) undertake and promote research in the field of consumer rights; (g) spread and promote awareness on consumer rights; (h) encourage non-Governmental organisations and other institutions working in the field of consumer rights to co-operate and work with consumer protection agencies; (i) mandate the use of unique and universal goods identifiers in such goods, as may be necessary, to prevent unfair trade practices and to protect consumers' interest; (j) issue safety notices to alert consumers against dangerous or hazardous or unsafe goods or services; (k) advise the Ministries and Departments of the Central and State Governments on consumer welfare measures; (l) issue necessary guidelines to prevent unfair trade practices and protect consumers' interest." 51. Under Section 19 of the CPA, 2019, the CCPA is empowered to, either suo moto or upon complaints or directions from the Central Government, conduct a preliminary inquiry in respect of any violation under the Act and if a prima facie case is made out, it can direct investigation either by the Director General or by the District Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "21. Power of Central Authority to issue directions and penalties against false or misleading advertisements.- (1) Where the Central Authority is satisfied after investigation that any advertisement is false or misleading and is prejudicial to the interest of any consumer or is in contravention of consumer rights, it may, by order, issue directions to the concerned trader or manufacturer or endorser or advertiser or publisher, as the case may be, to discontinue such advertisement or to modify the same in such manner and within such time as may be specified in that order. (2) Notwithstanding the order passed under sub-section (1), if the Central Authority is of the opinion that it is necessary to impose a penalty in respect of such false or misleading advertisement, by a manufacturer or an endorser, it may, by order, impose on manufacturer or endorser a penalty which may extend to ten lakh rupees: Provided that the Central Authority may, for every subsequent contravention by a manufacturer or endorser, impose a penalty, which may extend to fifty lakh rupees. (3) Notwithstanding any order under sub-sections (1) and (2), where the Central Authority deems it necessary, it may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 18 of the CPA, 2019. The same are highlighted hereinbelow: Soft Powers of the Central Consumer Protection Authority S.No. Relevant Provisions of CPA, 2019 Description 1. Section 18 (2) (d) Power to review the matters relating to consumer rights. It includes research into consumer rights and safeguards that may be required. 2. Section 18 (2) (e) To recommend adoption of international covenants and best practices for enforcement of consumer rights. 3. Section 18 (2) (g) Spread and promote awareness on consumer rights. 4. Section 18 (2) (h) Encourage NGO and other institutions working in the relevant field to cooperate and work with consumer protection agencies 5. Section 18 (2) (k) Advice State and Central Governments, Ministries and other Departments on consumer welfare measures. 6. Section 18 (2) (j) Issue safety notices to alert consumers against any hazardous or unsafe goods/services. 57. The enforcement powers of the CCPA is displayed in the chart below: Enforcement Powers of the Central Consumer Protection Authority S.No. Relevant Provisions of CPA, 2019 Description 1. Section 15 CCPA shall have a separate investigation wing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CCPA is complemented with the powers vested and recognized in it under Section 20 of the CPA, 2019 which inter alia provides that when the CCPA finds any practice which is unfair or prejudicial to consumer interest, it can direct discontinuation of the said practice under law after affording a hearing. Any directions issued by the CCPA, if not complied with, could result in criminal prosecution under Section 88 of the CPA, 2019. This provision empowers the CCPA to impose penalties of imprisonment and fines as well. 62. The CCPA is, thus, not merely a recommendatory or advisory body. Under Section 18 (2) (l) of the CPA, 2019, it has the power to issue guidelines and such guidelines ought to be for preventing unfair trade practices and for protecting consumers' interests. If such guidelines are not followed, the CCPA can direct an enquiry or an investigation by the concerned District Collector under Section 19 of the CPA, 2019 and after obtaining a report thereto it can issue notice to the concerned service provider and after hearing the service provider, it can even direct discontinuation of the said practice under Section 20 of the CPA, 2019. Failing to comply with the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules, was not traceable. The Court therefore held that they did not acquire the character of binding Rules. This is clear from the following observations of the Court: "84. In the present case, it is not the government, but private entities like Amway, Oriflame and Modicare, which are trying to seek enforcement of the DSGs. In fact, they are seeking to enforce guidelines against third parties and not against those who might be bound by the DSGs, as and when it becomes law. Merely because the DSGs are notified in the Gazette, they do not attain the status of ' law' within the meaning of Article 13 of the Constitution. The source of the power to frame such guidelines is traceable only to the CPA. With the CPA, 2019 itself not having been notified, these draft guidelines could not have attained the character of 'binding Rules' under the CPA, 2019, or for that matter, even under the CPA, 1986. When clearly even the draft guidelines mentioned the Act to be the CPA, there was no occasion for the learned Single Judge to accept the plea that they could be sourced to Articles 73 or 77 of the Constitution of India. Therefore, there was no occasion to apply the decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vironment Protection Act, 1986 after recommendation by the Interministerial Committee. 72. It is noted that the guidelines in Gulf Co., (supra) are similar to the guidelines issued in the Amazon v. Amway (supra) case by the Interministerial Committee and not by any statutory authority. However, in the present case, as discussed above, the impugned guidelines have statutory backing under the CPA, 2019. 73. From the above discussion, it is clear that the impugned guidelines are issued by the CCPA under Section 18 (2) (l) of the CPA, 2019, which empowers it to 'issue guidelines'. The guidelines having been issued under powers vested under the Act, by the CCPA, the same would constitute valid law under Article 13 of the Constitution of India. 74. It is trite law that a regulation issued under a statute is valid law. The Supreme Court in the judgment Sukhdev Singh and Others v. Bhagatram Sardar Singh Raghuvanshi and Another [(1975) 1 SCC 421] while deciding on the validity of regulations framed under the Oil and Natural Gas Commission Act, 1959, the Life Insurance Corporation Act, 1956 and the Industrial Finance Corporation Act, 1948 held that the same have force of law. The Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merica a "public agency" has been defined as an agency endowed with governmental or public functions. It has been held that the authority to act with the sanction of Government behind it determines whether or not a governmental agency exists. The rules and regulations comprise those actions of the statutory or public bodies in which the legislative element predominates. These statutory bodies cannot use the power to make rules and regulations to enlarge the powers beyond the scope intended by the legislature. Rules and regulations made by reason of the specific power conferred on the statute to make rules and regulations establish the pattern of conduct to be followed. Rules are duly made relative to the subject-matter on which the statutory bodies act subordinate to the terms of the statute under which they are promulgated. Regulations are in aid of the enforcement of the provisions of the statute. Rules and regulations have been distinguished from orders or determination of statutory bodies in the sense that the orders or determination are actions in which there is more of the judicial function and which deal with a particular present situation. Rules and regulations on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o frame rules and regulations. xxx xxx xxx 33. There is no substantial difference between a rule and a regulation inasmuch as both are subordinate legislation under powers conferred by the statute. A regulation framed under a statute applies uniform treatment to every one or to all members of some group or class. The Oil and Natural Gas Commission, the Life Insurance Corporation and Industrial Finance Corporation are all required by the statute to frame regulations inter alia for the purpose of the duties and conduct and conditions of service of officers and other employees. These regulations impose obligation on the statutory authorities. The statutory authorities cannot deviate from the conditions of service. Any deviation will be enforced by legal sanction of declaration by courts to invalidate actions in violation of rules and regulations. The existence of rules and regulations under statute is to ensure regular conduct with a distinctive attitude to that conduct as a standard. The statutory regulations in the cases under consideration give the employees a statutory status and impose restriction on the employer and the employee with no option to vary the conditions. An ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss would permit the restaurant establishments to charge for the food being sold as also the services being provided. An establishment is free to price its products in the manner as it pleases taking into account the raw-materials, salaries, expenditure, capital expenses on premises, man & machinery etc., However, once the pricing is done, to collect over and above the price, a prescribed rate of service charge - that too on a mandatory basis would not be justified. The right to carry on business cannot result in exaction of an amount which the consumer had neither bargained for nor agreed. Freedom under Article 19 (1) (g) would be curtailed or hindered only if the establishment is barred from pricing its goods as it pleases - not if a step is taken in consumer interest. 78. In such cases, while considering the nature of right alleged to have been impinged upon, the Court has to inter alia bear in mind the test of reasonableness as provided in Article 19 (6) of the Constitution of India as it is the primary duty of the State to cater to interest of society over individual interest. The same is captured best by the Latin legal maxim, salus populi supremo lex, which means, safety of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d manage the educational institutions is a fundamental right recognised under Article 19 (1) (g) of the Act. It also cannot be denied that this right is not "absolute" and is subject to limitations i.e. "reasonable restrictions" that can be imposed by law on the exercise of the rights that are conferred under clause (1) of Article 19. Those restrictions, however, have to be reasonable. Further, such restrictions should be "in the interest of general public", which conditions are stipulated in clause (6) of Article 19, as under: "19. (6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law insofar as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law insofar as it relates to, or prevent the State from making any law relating to- (i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or (ii) the carrying on by the State, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its scope. In that sense, it defines the justification for limitations that can be imposed on such a right. 62. It is now almost accepted that there are no absolute constitutional rights [Though, debate on this vexed issue still continues and some constitutional experts claim that there are certain rights, albeit very few, which can still be treated as "absolute". Examples given are: (a) Right to human dignity which is inviolable, (b) Right not to be subjected to torture or to inhuman or degrading treatment or punishment. Even in respect of such rights, there is a thinking that in larger public interest, the extent of their protection can be diminished. 64. The exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an assessment based on proportionality i.e. balancing of different interests. 65. We may unhesitatingly remark that this doctrine of proportionality, explained hereinabove in brief, is enshrined in Article 19 itself when we read clause (1) along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the object sought to be achieved. If there is a direct nexus between the restrictions, and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise." 81. Thus, restrictions are permissible and would be reasonable if they are within the overall interest of what the statute intends to achieve and the measure is proportional to the said purpose. 82. The Supreme Court in Karnataka Live Band Restaurants Association v. State of Karnataka and Others, [(2018) 4 SCC 372] upheld the constitutionality of 'The Licensing and Controlling of Places of Public Entertainment (Bangalore City) Order 2005' issued under the Karnataka Police Act, which meant to regulate and license, places of public entertainment like live band restaurants, discotheques, cabarets halls, etc. This was done while dismissing the appeal made by Karnataka Live Band Restaurants Association wherein it was inter alia held that the Court while deciding such cases, has to do the same on the touchstone of, whether the restrictions imposed are reasonable in the interest of general public or not. The term 'in the interest of general public' in clause (6) of Article 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person on whom such restriction is imposed. What is, therefore, required to be decided in such case is whether the restrictions imposed are reasonable in the interest of general public or not. 47. This Court has laid down the test of reasonableness in State of Madras v. V.G. Row [State of Madras v. V.G. Row, (1952) 1 SCC 410 : AIR 1952 SC 196 : 1952 Cri LJ 966] and very succinctly said that it is important, in this context, to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial mind. 48. This Court has further ruled that the expression "in the interest of general public" occurring in clause (6) of Article 19 is an expression of wide import which comprehends in it public order, public health, public security, morals, econo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two distinct tests. First, it being in the interest of general public and second, it being a reasonable restriction.[Cellular Operators Association of India and Others v. Telecom Regulatory Authority of India [(2016) 7 SCC 703]. The present guidelines satisfy the said tests as it is done in the interest of consumers as a class. The principle, benefit of larger interest of the society prevails over individual interest, fully applies to this case to reach the conclusion that the rights of consumers as a class would prevail over the right of restaurant establishments. The social and economic interest of the society as a whole is paramount. 85. Further, applying the doctrine of proportionality to the present case, it is found that the limitation on rights of the restaurant establishments is constitutional as the same is proportional to the purpose sought to be achieved i.e., the larger consumer interest. The impugned guidelines are a just means to achieve the said purpose and hence, cannot be held to be unconstitutional. III. Determining the nature of enforceability of service charge in restaurants and other establishments 86. The stand taken by the restaurant establishments is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acious to say the least. The same does not take into consideration the conduct of a customer who after entering a restaurant establishment, focuses primarily on ordering the food. On most occasions, the customer may not have even noticed the display of collection of service charge which may be printed on the menu card. Moreover, the collection of service charge is nothing but a collection of payment of tips/gratuity, for services which are rendered - but in a mandatory fashion, mostly without the knowledge of the customer. The collection of service charge over and above the price of the product consumed, is not merely a charge which is levied but is an extraordinary burden that is placed on the consumer that too on most occasions unknowingly. 92. The Court in order to analyse this issue, has to take into consideration the general conduct of customers who visit restaurant establishments. The customers who visit such establishments could be simply walk-in customers or even customers who make a conscious choice to visit an establishment. In either case, once the customer enters the establishment, it is unlikely that any customer would go away merely upon seeing the menu card. Once th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unfair contract under Section 2 (46)(vi) of the CPA, 2019 as well. The same is extracted hereinunder for a ready reference: "(46) "unfair contract" means a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including the following, namely:- (i) requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or (ii) imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or (iii) refusing to accept early repayment of debts on payment of applicable penalty; or (iv) entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or (v) permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or (vi) imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage; " 96. A peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furniture, carpets, Air-conditioners, fans, waiters, cleaning, moping and dusting the restaurant, maintenance of reception etc.; for packed food, there is no need to give such like services. The complainant has made a vain attempt to make the bricks without straw. Foras below have nowhere missed the wood for tree. We add our voice to theirs and dismiss the revision petition." Principle of Unconscionable Bargain 99. Freedom of contract, is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. Freedom of contract is of little value when one party has no alternative between accepting a set of terms proposed by the other or doing without the goods or services offered. [Chitty on Contracts, 25th Edn., Vol. I, in para 4]. 100. The principle of unconscionable bargain was first judicially recognized in Indian jurisprudence in a seminal judgment of the Supreme Corut, being, Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156]. In the said judgment, the Supreme Court adjudicated the validity of a contract between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure of circumstances, generally economic, which results in inequality of bargaining power. Such contracts will not fall within the four corners of the definition of "undue influence" given in Section 16 (1). Further, the majority of such contracts are in a standard or prescribed form or consist of a set of rules. They are not contracts between individuals containing terms meant for those individuals alone. Contracts in prescribed or standard forms or which embody a set of rules as part of the contract are entered into by the party with superior bargaining power with a large number of persons who have far less bargaining power or no bargaining power at all. Such contracts which affect a large number of persons or a group or groups of persons, if they are unconscionable, unfair and unreasonable, are injurious to the public interest. To say that such a contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to court to have the contract adjudged voidable. This would only result in multiplicity of litigation which no court should encourage and would also not be in the public interest. Such a contract or such a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... background the petitioners now contend that the Authority has collected surcharge as component of price which the Authority was not authorised or entitled to collect. Even if there may be any merit in this contention, though there is none, such a relief of refund cannot be the subject-matter of a petition under Article 32." 104. The above decision makes it clear that the sellers' choice and freedom to price his products, can be regulated if there is any statutory provision which negates the same. In the present case, the CCPA issued guidelines inter alia, negating the practice of restaurant establishments to collect mandatory service charge. The impugned guidelines have the mandate of the CPA, 2019 and thus, the present case is not covered by the decision in Prem ji Bhai Parmar and Ors. Vs. DDA (supra). Contract to be vitiated if contrary to public interest: 105. It is trite law that contracts which are against public interest or public welfare are contrary to public policy and the same are therefore, unlawful and void. This principle has been recognised by the Supreme Court in Rattan Chand Hira Chand v. Askar Nawaz Jung and others [(1991) 3 SCC 67] wherein it was inter alia obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of what is called public policy". But as observed by Prof. Winfield in his article "Public Policy in the English Common Law" [(1928) 42 Harv L Rev 76, 91] : "Some judges appear to have thought it [the unruly horse of public policy] more like a tiger, and refused to mount it at all, perhaps because they feared the fate of the young lady of Riga. Others have regarded it like Balaam's ass which would carry its rider nowhere. But none, at any rate at the present day, has looked upon it as a Pegasus that might soar beyond the momentary needs of the community." All courts have at one time or the other felt the need to bridge the gap between what is and what is intended to be. The courts cannot in such circumstances shirk from their duty and refuse to fill the gap. In performing this duty they do not foist upon the society their value judgments. They respect and accept the prevailing values, and do what is expected of them. The courts will, on the other hand, fail in their duty if they do not rise to the occasion but approve helplessly of an interpretation of a statute or a document or of an action of an individual which is certain to subvert the societal goals and endanger the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged. The grievance of the Appellant was that the concerned bank did not charge the said amount earlier, however, the same was suddenly introduced as a unilateral action of the bank without informing the Appellant customer. 108. In this case, while recognizing business exigencies which require such charges to be levied, the Supreme Court recognized as under: "6. The appellant before us, namely, the customer, has urged that the National Commission is not right in holding that it relates to pricing of services rendered by the Bank. The arguments advanced before the District Forum and the State Commission have been reiterated before us. Much stress has been placed on the point that the charge has been unilateral, without consent and against the directives of RBI. We are not impressed by the submission made on behalf of the appellant. The fact which cannot escape notice is that recently there has been a large-scale change and improvement in the working and method and manner of functioning of various institutions, including banks. Very many services, which were not available earlier, have been introduced with the aid of mechanical and technological devices. Introduction of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the range of 5% to 20% in lieu of tip. Consumers had also complained that service tax was being charged on the service charge. At that time, the Hotel Association of India ('HAI') had clearly written to the Ministry of Consumer Affairs, Food and Public Distribution that service charge is discretionary and can be waived of. The extract from the said letter of the HAI dated 28th October, 2015 is set out below: "It is also pertinent to note that service charge is completely discretionary. Should a customer be dissatisfied with the dining experience he can/she can have it waived off. Therefore it is deemed to be accepted voluntarily. Less than one percent of customers ask for a waiver, further substantiating their acceptance of this practice. Hotels and restaurants are among the biggest employers of persons with less than secondary education, those socially and economically deprived and/or with disabilities. The earnings from service charge go a long way in improving their earnings, which would otherwise be much less. The industry is a very large vocational skills trainer and trains lakhs of unskilled youth yearly. Service charges and fair wages enable the industry to recruit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to give a tip/gratuity is not when he/she enters the hotel/restaurant and also not when he/she places his/her order. It is only after completing the meal that the customer is in a position to assess quality of service, and decide whether or not to pay a tip/gratuity and if so, how much. Therefore, if a hotel/restaurant considers that entry of a customer to a hotel/restaurant amounts to his/her implied consent to pay a fixed amount of service charge, it is not correct. Further, any restriction of entry based on this amounts to a trade practice. which imposes an unjustified cost on the customer by way of forcing him/her to pay service charge as condition precedent to placing order of food and beverages, and as such it falls under restrictive trade practice as defined under section 2(1 )(nnn) of the Act. (5) In view of the above, the bill presented to the customer may clearly display that service charge is voluntary, and the service charge column of the bill may be left blank for the customer to fill up before making payment. (6) A customer is entitled to exercise his/her rights as a consumer, to be heard and redressed under provisions of the Act in case of unfair/restrictive tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Delhi; Aromas Cafe, Viviana Mall, Mumbai; Beer Cafe, Ambience Mall, Gurgaon.] The impact of this is that the consumers presume that this charge is levied by the government. viii) The bills are also generated on dot matrix printers and the print out of the bill is barely readable. Measures taken by the Department of Consumer Affairs 116. In view of the various complaints that were received, a press release was issued by the Ministry of Consumer Affairs on 23rd May, 2022 to the following effect: "The Department of Consumer Affairs (DoCA) has scheduled a meeting on 2nd June, 2022 with the National Restaurant Association of India to discuss the issues pertaining to Service Charge levied by restaurants. The meeting follows as a result of DoCA taking notice of a number of media reports as well as grievances registered by consumers on the National Consumer Helpline (NCH). In a letter written by Shri Rohit Kumar Singh, Secretary, Department of Consumer Affairs to President, National Restaurant Association of India, it has been pointed out that the restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is Voluntary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned guidelines dated 4th July, 2022 were issued. In order to give teeth to the said guidelines, the Ministry also wrote to all the District Collectors to take necessary actions to ensure that the guidelines are properly enforced. 118. The Ministry of Railways also issued a circular dated 15th July, 2022 revising the charges for onboard catering services. The said circular clarified that the same would not include service charge. 119. The stand of the Ministry of Consumer Affairs is that the guidelines issued by the Department of Consumer Affairs with respect to service charge found enormous support amongst consumers and an online poll which was run by the said Department on 'X' platform (formerly known as, 'Twitter'). The same shows that that 88.5% of consumers did not wish to have a service charge by default on their bills. The same has been reflected below: 120. According to the Ministry of Consumer Affairs, various decisions have also been passed by Consumer Forums directing that service charge shall not be levied and forceful collection of the same is a violation of consumer rights. The details of the said orders are extracted hereinunder for a ready reference: "(i) Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to the notice of this Forum regarding the letter to the Secretary from the Government of India, Ministry of Consumer Affairs, Food & Public Distribution which reads as follows: "In the hotels and restaurants are following the practice of charging 'Service charge' in the range of 5-20% in lieu of tips. A consumer is forced to pay this charge irrespective of the kind of service provided to him. The consumers are also required to pay service tax on this service charge so collected by the hotels and restaurants. The Hotel Association of India observed that the service charge is completely discretionary. Should a customer be dissatisfied with the dining experience he I she can have it waived off. Therefore, it is deemed to be accepted voluntarily. In the hotel/restaurants that the 'service charges' are discretionary / voluntarily and a consumer dissatisfied with the services can have it waived off proves that the service charge is voluntary not compulsory. Considering the facts and circumstances of the case this Forum is of the considered view that the opposite party is not entitled to collect service charge compulsorily." The Commission directed the restaurant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no uniformity in the percentage of service charge being collected. The manner of enforcement of payment of service charge is also coercive in nature. In some cases, service charge is being confused with service tax or a mandatory tax imposed by the government. In fact, for the consumers, the collection of service charge is proving to be a double whammy i.e., they are forced to pay service tax and GST on the service charge as well. This position cannot be ignored by the Court. 124. The submission on behalf of the Petitioners that service charge is used in some way for benefit of staff, is a feeble argument to say the least. There is no evidence provided to show that the amount collected by way of service charge is in some way benefitting the staff. Even if it were so, it is only such amount which is voluntarily paid by customers that can be utilised for the welfare of the staff. Mandatory collections which are detrimental to customers cannot be justified on the basis of some hidden benefit to staff of the establishments. 125. A compulsory mandatory levy is a sovereign function. The same has been held in a catena of judgments. The Respondents rely on the decision of Assistant Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Nevertheless, the collection of fees or toll can be assigned to a developer or contractor for a defined period, including for the purpose of recovery of the investment made in developing the infrastructure. Thus, we concur with the High Court's conclusion that the Concession Agreement, in so far as it sub-delegates the power to levy and collect fees to NTBCL, is unlawful, and the Regulations justifying such sub-delegation undermine the objective of Section 6A of the 1976 Principal Act. 51. Not only this, the Regulations came to be enacted only after the Concession Agreement had been executed, and were seemingly designed to validate the actions already taken by NTBCL and NOIDA. We may also hasten to add that the subject Regulations are neither retroactive nor can be applied retrospectively and are thus alien to the terms and conditions of the Concession Agreement. 52. It seems that NTBCL and NOIDA have indulged in trickery and placed the cart before the horse, in attempting to authorise actions post facto, thereby obscuring the full extent of misuse of power. We find it evident that these Regulations were introduced by NOIDA in the aftermath of enacting the Concession Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand taken by the Petitioners. Moreover, any such settlement cannot override the law. 133. The submission that collection of service charge is part of agreements and settlements entered into with the work force and labour, is also bereft of any merit inasmuch as when the Court had directed the establishments to place on record any documents to support this argument, hardly anything was forthcoming. Moreover, settlements with labour and work force have to be on the basis of the revenues generated by the establishments and service charge cannot be justified on the ground that salaries or bonuses of staff have to be paid. 134. There can be a settlement between the restaurant establishments and work force as to the manner in which any voluntary tip or gratuity that is paid by the customer is divided so that it is not appropriated by any particular individual or class of waiters, bearers, etc., Such agreements are understandable. However, any agreement that has the effect of impinging on the right of the consumer would be wholly untenable. The establishments are free to price their products in whatever manner they deem appropriate so long as the consumer is not being misled. 135. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell in advance before placing an order. Also, the same is clearly included as a separate heading in the bill as a "Charge", and not as a "Tax". Service Charge is neither a hidden charge nor a compulsory fee in any guise as the restaurants maintain utmost transparency with regard to the amount, the rate and the purpose of the charge. It is shown separately in the final bill and payment of the same is up to the prerogative of customer / guest." As per FHRAI itself, the payment of service charge is the prerogative of the customer. 139. Thus, it is clearly represented by FHRAI that the establishments themselves did not deem payment of service charge as mandatory. They also took the position that the same would be in the form of a voluntary contribution. The initial letter from the HAI dated 28th October, 2015 was also to this effect that service charge is a voluntary payment which can be waived by the restaurant establishments on request of the customer. 140. Despite issuing these letters to the Ministry of Consumer Affairs, Food and Public Distribution both the Associations which are before the Court have taken a contrary stance which would be impermissible. The establishments woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the carry bags. Prominent prior notice and information has necessarily to be there (inter alia at the entrance to the retail outlet also), to enable the consumer to make his choice of whether or not to patronize the concerned outlet, and the consumer has necessarily to be informed of the additional cost for carry bags and of their salient specifications and price before he makes his selection of the goods for purchase." 144. The lack of clarity of the price of the product or the misleading nature of the price of the product by charging compulsory and mandatory service charge, results in an unfair trade practice under Section 2 (47)(i) of the CPA, 2019. This provision is being misread by the Petitioners when the argument is made that it would only be an unfair trade practice if the said practice is for the purpose of promotion, sales, use or supply of goods. However, a perusal of the definition of unfair trade practice under the Act shows that a trade practice which is unfair for the 'provision of any service' would also be an unfair or a defective trade practice. This part of the definition i.e., "or for the provision of any service" is being ignored by the Petitioners. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the impression sought to be given by the Petitioners that service charge is not meant purely for the sake of the employees, may not be wholly correct. However, in this decision the question as to whether the collection of mandatory service charge from consumers is valid or not did not arise. 149. In The Rambagh Palace Hotel, Jaipur v. The Rajasthan Hotel Workers' Union, Jaipur (supra) the question that arose for consideration was whether the workers are entitled to dearness allowance. The Industrial Tribunal had reduced the dearness allowance considerably. The argument of the hotel was that tips which were given to the staff which take the shape of half the salary are also distributed by management to the workers and thus, some adjustment needs to be given in that regard. The Court held that tips are not amounts paid by the management from its own pocket but merely a transfer of money which is collected by the establishment to the staff. The receipt of tips cannot reduce the award of dearness allowance and therefore, the Supreme Court did not interfere with the award of the Industrial Tribunal. This decision cannot in any manner be relied upon by the Petitioners to argue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by the employer in a fiduciary capacity as trustee for payments that are received from customers which they disburse to their employees for service rendered to the customer. There is, therefore, no reference to the contract of employment when these amounts are paid by the employer to the employee. Shri Kaul, however, argued that there is an indirect reference to the contract of employment inasmuch as but for such contract, tips to employees could not possibly have been paid at all. We are afraid that this argument must be rejected for the simple reason that the payments received by the employees have no reference whatsoever to the contract of employment and are received from the customer, the employer only being a conduit in a fiduciary capacity in between the two. Indeed, if Shri Kaul's arguments were to be accepted, even the position accepted by the revenue and consequently the High Court that tips given in cash, which admittedly are not covered by Section 192, would also then be covered inasmuch as such tips also would not have been given but for the contract of employment between employer and employee. Clearly, therefore, such argument does not avail Revenue." The ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce charges at 9% and the same is also displayed outside the restaurant providing information to the customer before hand as well before the order is placed for food/meal. A customer who can read the order for kind of dishes mentioned in the menu card as is the case, can very well read the conditions mentioned in the said card before placing the order for the food/meal. Non- reading of the same would necessarily be at his peril. It is difficult to comprehend that a customer choosing dishes amongst others as mentioned/offered in the menu card can mistake 'service charges' for sales tax as is the contention of the complainant. Non-disclosure of reasons for levying service charges, as is the practice in other similar restaurants/hotels, does not make the practice as unfair within the meaning of Section 36A of the Act. There is thus no unfair practice or deceptive method adopted by the respondent as contended by the complainant. In fact the extra levy at 9% would act as a disincentive to the promotion of sales, which is a pre-requisite condition for holding the trade practice to be unfair. 9. It is true that, as generally understood and also impliedly accepted by the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of Section 33(i) of the Act. The practice followed by the respondent as well the others in trade in no way harms the competitor in general or customer in particular. It has, thus, been sufficiently demonstrated that the respondent did not indulge in unfair or restrictive trade practices as alleged. The observations of the Commission made in the order passed under Section 12A of the Act were without considering the evidence on both sides rendered during the course of trial, as such, the same cannot be considered to be conclusive. In our considered view, the Notice of Enquiry is not maintainable and the same deserves and is directed to be discharged with no order as to the costs on the facts and in the circumstances of the case." 155. In the present case, however, no such approval has been granted by the Ministry of Tourism towards collection of the service charge. Thus, while noting that the MRTP decision would not be binding of this Court, the above fact would be of significance and would change the basic foundation laid down in the judgment of S.S. Ahuja v. Pizza Express (supra) itself. 156. The Respondents rely upon Rajashekar v. AnTeRa Kitchen and Bar (Case No. CC/610/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 164. The Court therein had analysed the manner in which the amount collected was being used and held that the service charge was considered as part of the employees' regular rate of pay. It was not a tip because Tips are solely determined by customers whether to pay or not. The Court primarily upheld the Department of Labor regulation which provided that a compulsory charge for service is not a tip. 165. It was only in those facts that the Court held that the 18% service charge was a bona fide service charge and not a tip because it was a compulsory charge of a service it was not determined solely by the customers. The establishment succeeded in view of the labour law regulations prevalent in the said jurisdiction. 166. The Court agrees with the Respondents that service charge being collected compulsorily or mandatorily by the restaurant establishments would be contrary to law, as the same violates the right of consumers. The CCPA being the regulator empowered by the CPA, 2019 to protect the rights and interest of the consumers has rightly framed the guidelines for barring the mandatory collection of service charge by the restaurant establishments. 167. It also needs to be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otel and Restaurant Association of India v. Union of India (UOI) and Ors. (supra) wherein the Supreme Court did not interfere with the decision of the High court which inter alia observed that the restaurant establishments selling mineral water in excess of MRP printed on the packaging, did not violate any law as the same did not merely constitute a sale or transfer of commodities by the restaurant establishment to its customers. The relevant paragraphs of the judgment are extracted hereinunder for a ready reference: "13. On a reading of the said Act and the Rules made thereunder, it is clear that the position qua "sale" remains exactly the same as that contained in the 1976 Act, which now stands repealed. This being the case, we are of the view that the learned Single Judge was absolutely correct in his conclusion that despite the constitutional amendment having been passed, the definition of "sale" contained both in the 1976 Act and now in the 2009 Act would go to show that composite indivisible agreements for supply of services and food and drinks would not come within the purview of either enactment, and that this is for the very good reason that the object for both these ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record and the same is accordingly rejected; (vi) The fact that service charge can be collected as it is part of a voluntary contract/agreement made by the consumer who enters the establishment and avails of the services after seeing the chargeability of service charge on the menu card is an argument which is not tenable as such a condition is onerous and constitutes an unfair contractual condition under Section 2(46) of the CPA, 2019; (vii) Consumer rights cannot be subjugated to an argument that a contract is being entered into by the consumer while entering the establishment to pay service charge as the payment and collection of service charge is itself contrary to law; (viii) While this Court holds that the mandatory collection of service charge is contrary to law and violates the guidelines, it is also of the opinion that if consumers wish to pay any voluntary Tip for services which they had enjoyed, the same would obviously not be barred. The amount however, ought not to be added by default in the bill/invoice and should be left to the customer's discretion. (ix) The CCPA may consider permitting change in the nomenclature for Service Charge which is nothing bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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